Bitcoin’s price surged to nearly $78,000 on August 21, marking one of the most significant rallies of the year, with the cryptocurrency rising roughly 18% in 48 hours and 24% on the week. The $58,000 lows are now in the distant past.
The trigger for this surge was the US Treasury’s unexpected move to double its long-term bond buybacks from $2 billion to $4 billion per session.
The Treasury’s decision directly targeted the 10-, 20-, and 30-year sectors, following a spike in the 30-year yield to 5.337%, a roughly two-decade high, due to sticky inflation and war-driven energy costs. The yield subsequently crashed below 5.19%.
Treasury Secretary Scott Bessent stated that he has a “big toolkit” to address rising bond yields. This move is the government stepping into the market to buy its own debt and inject liquidity.
Gautam Chhugani, a strategist at Bernstein, notes that Bitcoin historically has a positive reaction to liquidity expansion, due to speculative capital rotating between Bitcoin, gold, and stocks, chasing the hottest trade.
The Treasury’s buyback has flipped the attention back to Bitcoin, almost overnight. This development vindicates the bulls who called the bottom, including Larry Fink, who declared the leverage washout complete and turned bullish back in July.
Washington’s actions have added fuel to the fire, with President Trump meeting with top executives from Coinbase and Robinhood at the White House this week, called on Congress to pass a “fair version” of the CLARITY Act, and declared America will remain the “undisputed leader” in Bitcoin and crypto.
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Chhugani expects either the CLARITY Act to pass in the September session or accelerated SEC and CFTC rulemaking, which would unlock 24/7 perpetual futures on commodities and equities, compute derivatives, and tokenized stocks trading around the clock in the US.
The technical damage to the bear case is severe, with BTC blasting through the $71,700 to $72,000 resistance and now trading inside the $76,000 to $82,000 supply zone.
Holding above $75,000 keeps $80,000 and the top of that range in play. Losing $70,200 would put the whole breakout in question.
The base case after a move this violent is digestion around $75,000 to $77,000, rather than a straight line higher.
For people invested in Bitcoin, this development means that the cryptocurrency’s value may continue to rise, at least in the short term, as investors respond to the increased liquidity in the market. However, it’s also important to consider the potential risks and uncertainties associated with such a rapid price increase.
This surge is either the opening leg of the debasement trade that Bitcoin was built for, or a liquidity-driven sugar high that will evaporate when the bond market calls the Treasury’s bluff.